Making an Inheritance Work

If you receive an inheritance, it should not put you in a worse position than you were before. That happens all too often.

A common myth about people who inherit wealth is that it brings them financial security and they no longer need to worry about money. However, as is the case with people who win the lottery, people who suddenly inherit wealth are often soon in a worse financial position than they were previously.

Most of the time, inheritances do not grow a person's or a family's wealth.

The biggest problem is overspending, especially on unnecessary things. While it might be fine to splurge on one or two things, spending can quickly snowball until there is nothing left. There is always something more that can be purchased and heirs who are not careful, keep purchasing those somethings.

The best way to prevent this is to plan ahead.

Talk to your older relatives about what inheritance you might receive from their estate plans and ask for guidance in wealth management. Your relatives who have wealth, can teach you how they maintained that wealth.

If you do not know ahead of time that you will receive a large inheritance and get one suddenly, then you can still make plans if you are patient. Do not do anything with the inheritance for at least six months. You should take that time to think carefully and to get good financial advice.